Important Keyword: Form 26Q, TDS, TDS Return.

Save yourself from paying excess TDS

“Yes, there is a way to spend money wisely and save on TDS at the same time.” Planning is key here. While the law mandates TDS payments, it also offers avenues to mitigate them through strategic planning. If your total income doesn’t meet the taxable threshold, prudent investments like buying a home, retirement planning, or family insurance can help reduce unnecessary TDS payments.

Effective planning involves managing income sources, assessing investments, and estimating total income for the fiscal year to minimize TDS Payments. For instance, if your projected income falls below the taxable limit, you can avoid excess TDS payments on income.

For example, consider Rohit’s case for the financial year 2015-16. His total income is Rs. 3,45,000, which includes Rs. 12,000 from tax-saving FD interest. After deducting Rs. 1,02,000 under Section 80C, his taxable income is Rs. 2,43,000, below the basic exemption limit. However, banks deduct TDS on interest exceeding Rs. 10,000. To prevent redundant TDS deductions, Rohit can submit Form 15G, saving on unnecessary TDS payments from his interest income.

How Does TDS Payments work?

TDS, or Tax Deducted at Source, operates as a ‘pay as you earn’ method of taxation where the payer deducts a specified amount from the income of the payee and remits it to the government. This system applies to various types of income including salary, interest, rent, brokerage, commission, and professional fees. The Income Tax Department mandates TDS at prescribed rates, setting threshold limits for each income source beyond which TDS becomes applicable.

For instance, rental income falls under section 194-I of the Income Tax Act, where up to Rs. 1,80,000 annually is exempt from TDS.

When managing multiple income sources in a financial year, it’s essential to calculate the combined income to assess tax liability accurately. Taking advantage of available deductions and exemptions helps in optimizing tax planning and potentially avoiding or reducing TDS obligations.

How to avoid TDS?

If an individual’s estimated total income for a financial year is below the basic exemption limit, they can avoid Tax Deducted at Source (TDS). For salaried individuals, this can be achieved by declaring other income, investments, and eligible expenditures to their employer, who then adjusts TDS deductions accordingly.

However, for non-salary incomes, specific forms need to be filled out to prevent TDS:

1. Form 15G/15H: These are self-declaration forms applicable for interest income on securities, dividends, income from units under section 197A. For instance, if you receive interest on fixed deposits, submitting Form 15G to the bank exempts TDS deduction on your interest income. Form 15H is for senior citizens (age 60 years or more). These forms now include rental income since 1st June 2016. Filing Form 15G/15H at the beginning of each financial year is advisable to prevent unnecessary TDS deductions. Separate forms are required for each income source; for example, if you have fixed deposits in multiple banks, you need to submit Form 15G/15H to each bank.
2. Form 13: This form is required for incomes like commission, brokerage, lottery tickets, etc. It should be submitted to the Income Tax Assessing Officer (AO) to obtain a certificate for deducting tax at a lower rate or not deducting tax at all, depending on the applicant’s total income justification. This certificate is valid only for the year it is issued.

It’s essential to submit these forms annually to manage TDS effectively, especially for incomes where TDS deductions might not be necessary due to total income falling below the taxable threshold or eligibility for lower rates of taxation.

Things to keep in mind in TDS Payment

Here are key considerations to keep in mind regarding TDS payments:

1. Assess Total Income Carefully: Before submitting forms or certificates to avoid TDS, thoroughly assess your total income. Deliberately avoiding TDS can lead to penal provisions if detected by the tax department.
2. Irrevocability of Forms: Once submitted, there is no provision in the income tax act for withdrawing Form 15G, Form 15H, or Form 13. Therefore, ensure accuracy before submission.
3. Self-Assessment and Advance Tax: If your total income exceeds the exemption limit after considering deductions and exemptions, perform a self-assessment of your tax liability. Pay advance tax on any additional income to avoid penalties.
4. Availability and Submission: Forms such as Form 15G, Form 15H, and Form 13 are readily available at banks, post office branches, and on the tax department’s website. Nowadays, you can also submit Form 15G / 15H electronically for convenience.

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Official Income Tax Return filing website: https://incometaxindia.gov.in/